Why you should care

The global drug trade’s many fingers are evolving — to become more nimble, more quickly.

By James Bargent

The Daily DoseMAR 22 2014

With his snarling eyes and bushy mustache, Joaquin “El Chapo” Guzman looked the epitome of a Latin American drug lord as he was hauled in front of the cameras by the Mexican marines in late February.

But despite his power, his wealth and the mythology that surrounds him, El Chapo was not the all-powerful cocaine emperor of popular imagination. Rather, he was the chairman of a board. An unconventional board, certainly: He oversaw a drug trafficking conglomerate with semi-independent subsidiaries around the globe.

Joaquin ‘El Chapo’ Guzman is escorted to a helicopter in handcuffs.

Source Getty

El Chapo’s Sinaloa Cartel is the most powerful criminal organization in Latin America, but it operates in a changing underworld where the traditional drug cartel — a monolithic mafia controlled by a marauding tyrant — is extinct. The integrated and hierarchical organizations of old have been replaced by decentralized networks of specialized service providers, driven by market forces rather than a mafia bond.

This is the future of the cocaine trade. And its evolution doesn’t fall so far from the way the rest of the business world is evolving, say experts.

There are no more Escobars in the Colombian underworld. There are no more gentlemen either.

“The modern day drug trafficking networks are homologous to flexible and agile businesses, which can adapt quickly,” said David Martinez-Amador, an academic and member of the criminologist network CRIMIMEX.

On one side of these networks are the logistical cells: cocaine brokers with bulging contact books, couriers overseeing transport of drugs and cash by land, air and sea, and financial wizards with an intricate knowledge of how to launder proceeds in the global economy.

On the other side is the muscle: cells of hitmen, narco-paramilitaries, street gangs, and even corrupt security forces, who are paid to control territory, collect debts and take out rivals.

The original Latin American drug cartels were born out of the Colombian cocaine boom of the 1980s — which created Pablo Escobar’s Medellín Cartel — and their bitter rivals, the Cali Cartel, led by the Rodriguez Orejuela brothers.

The two cartels took very different approaches — the extreme violence and ostentatious behavior of Escobar contrasted with the low profile and bribe first, bullet second tactics of the “gentlemen of Cali.” But their aim was the same: to control the cocaine trade from source to sale.

Pablo Escobar

Source Getty

Both cartels fell hard. Escobar was gunned down on a Medellin rooftop and the Rodriguez Orejuela brothers are rotting in U.S. prison cells.

There are no more Escobars in the Colombian underworld. There are no more gentlemen either.

The modern day cocaine trade is run by deal brokers and specialists, and overseen by the remnants of Colombia’s now demobilized counter insurgency movement — paramilitary-criminal hybrids known as the BACRIM (from the Spanish abbreviation for “criminal bands”).

Drug traffickers use those criminal bands in many ways, says McDermott: “It might be guarding laboratories, it might be escorting shipments from a point within the country to a departure point, and these are also the guys who will make sure you don’t get ripped off — so they get paid their cut and they are the regulators of the industry.”

However, the Colombians are now little more than suppliers in the cocaine trade, making around $5,000 per kilo, compared to $16,000 back in the day. The big profits instead go to the Mexican cartels, which are the real blue stock drug trafficking operations.

Two organizations in particular have come to dominate the trade, El Chapo’s Sinaloa Cartel and the Zetas.

The Zetas were born out of a Mexican Special Forces unit that defected in 1997. True to their origins, they developed a military approach to organized crime, using brutal violence to seize and control territories.

They expanded rapidly, leaving a trail of blood that stretched from the Mexico-U.S. border to Guatemala. However, the strain of maintaining discipline over such a widely spread army proved too much, and the Zetas have been torn apart by infighting and the loss of several key leaders.

Sinaloa Cartel is the General Electric of drug trafficking.

“They fragmented, and in the end, this powerful paramilitary cartel has become — at least in Mexico — a group with limited capacity, that survives more through extortion, kidnapping and assassinations than through drug trafficking,” said Martinez-Amador.

The Sinaloa Cartel, in contrast, is the General Electric of drug trafficking: a multinational parent company with hundreds of subsidiaries and service providers across the world.

Alleged members of the Zetas drug cartel attend a trial at the Supreme Court of Justice in Guatemala City, January 30, 2014.

While cartel emissaries oversee international trafficking operations, most of the actual work is outsourced to local partners that range from Central American transport networks to Mexican-American prison gangs handling distribution.

Even within Mexico, the Sinaloa Cartel operates through subsidiaries, allying themselves with local “baby cartels” and sub-contracting specialists — among them the security forces that they often contract as hired guns.

What does the decentralized business model mean for El Chapo’s arrest? That the flow of cocaine is not likely to be affected at all.

“They don’t interfere in the slightest in the leadership of their associates, and so what affects “headquarters” has little impact on the “subsidiaries,” said Martinez-Amador. And while El Chapo was just one member of the Sinaloa board, he was the most avaricious and expansionist, and had been seeking a Sinaloan criminal monopoly through his own brutal and corrupt versions of hostile and friendly takeovers.

According to Martinez-Amador, these ambitions may have been at the root of his downfall. His arrest could now see the remaining Sinaloan executive directors focus on consolidation instead of expansion as the drug trade continues to fragment and specialize.

“Perhaps what we saw in Mexico was an ‘antitrust’ policy in combating organized crime,” he said. After all, as any economist will tell you, a monopoly is bad for any market — legal or illegal.

This piece was originally published 3/22/14 and updated as of 11/2/14.